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Tuesday, 5 February 2008

Dubai's Tamweel mulls $500 mln Islamic bonds

By John Irish

DUBAI (Reuters) - Dubai-based mortgage lender Tamweel TAML.DU said on Monday it could sell Islamic bonds worth up to $500 million as early as March, but will hold off on securitization plans until at least the year end due to market conditions.Tamweel, which sold a $300 million convertible Islamic bond, or sukuk in January, is planning to do a multi-currency issue as part of a medium-term note program to diversify its funding streams."It might be in Singapore, Europe ... it could be regional, even in dirhams," Feras Kalthoum, head of investments, told the Reuters Islamic Finance Summit in Dubai.Tamweel, which operates according to Islamic law, has still to decide what currency and when to sell the bonds, which would help finance expansion in its loan bank."It could happen in Q1 ... and will be up to $500 million," Kalthoum said.Tamweel sold $210 million of asset-backed securities in July, one of the first companies in the region to do so, and expects to return to the market by at the latest mid-2009."It would be a concern if we were not able to tap the securitization market before the first half of 2008," he said.The bonds, like traditional sukuk, are asset-backed. But unlike sukuk, they allow buyers direct access to the underlying asset. These are kept separate from the borrower.The assets used to back Tamweel's bonds were lease-to-purchase contracts on residential properties -- a method of buying homes that complies with Islamic law."We don't have the visibility today for another securitization," said Kalthoum.The Islamic finance industry, with its bias towards investments backed by physical assets, was poised to be the main beneficiary and Gulf mortgage firms and banks were scrambling last year to announce sales of asset-backed bonds.That was before the market for securities backed by U.S. subprime mortgages imploded, forcing banks around the world to write down at least $80 billion in losses and borrowers to scrap plans to sell bonds."The fully funded part of it (the loan book) that has not been securitized is 5.3 billion dirhams ($1.44 billion) as of the end of 2007," Kalthoum said.Tamweel would look to return to the securitization market at the earliest by the end of the year given that the commercial mortgage-backed securities were "closed" and residential mortgage-backed securities had wider spreads and timing was key.(Reporting by John Irish)